Bill has had a bad day. He's down $1,000. He thinks, "I can't end the day down $1,000. I've just got to make that money back by the end of the day." He continues to trade even though his performance is off, and he feels the pressure to make back what he's lost. He makes a few trading mistakes, and loses another $5,000. His account balance has taken a big hit. In hindsight, Bill realizes that he would have been better off if he had just stood aside, rested, and regained his composure before continuing to trade. Instead, he has dug a deeper hole than necessary, and it will be even harder to get out of it. Sound familiar? Many traders are afraid to accept their limitations. Rather than face facts, they continue to trade and pay the price in terms of severe losses. Winning traders, in contrast, monitor their mood, mindset, and skill level every minute of the day. If any of these factors are off, they take a break. It's vital for long-term success to develop a self-monitoring plan. Monitor your general mood and your specific emotions. When you aren't feeling up to par, stop trading.

Systematically monitoring your mood is essential. Some traders suggest rating one's mood before the markets open on a 1-10 point scale, ranging from out of sorts, pessimistic (1) to full of energy, optimistic (10). Unless they rate themselves at an 8 or above, they take the day off. They rest, relax, and reenergize before returning to the markets.

In addition to rating your general mood, it's also important to identify feelings of regret and revenge. When we've made a series of losing trades, we regret it. Regret is a powerful emotion; it's often more powerful than fear and greed. Traders have a strong need to avoid regret. Feeling regret forces us to admit that we were wrong. It makes us feel guilty. We entertain "if-only" scenarios: "If only I had done X or Y, I would not have lost." Regret makes us feel inadequate, and uncomfortable. The easiest way to avoid regret is to deny you've made a mistake, to believe that one can still make back what one has lost. The problem with avoiding regret is that you shift your attention away from the problem. You don't notice that something is wrong. You fail to see that a fundamental factor has changed, either you have changed psychologically or the market conditions have changed. In either case, it's better to stand aside than continue trading. Look for signs that you are avoiding regret. Focus on feelings of anger, frustration, or revenge. When you've made a series of losses that you view as unfair, you will feel angry; you'll want to take your revenge out on the markets. When you feel these emotions, it's probably a way of avoiding subsequent feelings of regret upon admitting a loss. It's vital for your survival to stop trading at that point. You've lost your objectivity and it's likely that you will trade impulsively because your full attention is not on your immediate experience. A related emotion is fear. When you are afraid of the consequences of losing money, you are also avoiding regret. It's better to stop trading, regain your composure, and start up again when you are refreshed, which may be the next day.

You should also take active steps to minimize feelings of regret. Neutralize these emotions by monitoring your self-talk. When one feels regret, he or she usually thinks, "I should have done X, and I'm an unworthy person for not doing X." The truth, however, is that the markets are unpredictable. You can't blame yourself for not anticipating every possible influence that may go against your trading strategy. And if you lost money because you didn't clearly specify a trading plan or stick with it, feeling regret isn't going to help you very much. It may be useful in this case to kick yourself a little, but it's much more useful to take a more positive outlook, and think, "Trading takes practice; the more I practice, the more I'll develop the discipline I need to be a profitable trader." By acknowledging that you've made a little mistake and reminding yourself that you will do everythin

Bill has had a bad day. He's down $1,000. He thinks, "I can't end the day down $1,000. I've just got to make that money back by the end of the day." He continues to trade even though his performance is off, and he feels the pressure to make back what he's lost. He makes a few trading mistakes, and loses another $5,000. His account balance has taken a big hit. In hindsight, Bill realizes that he would have been better off if he had just stood aside, rested, and regained his composure before continuing to trade. Instead, he has dug a deeper hole than necessary, and it will be even harder to get out of it. Sound familiar? Many traders are afraid to accept their limitations. Rather than face facts, they continue to trade and pay the price in terms of severe losses. Winning traders, in contrast, monitor their mood, mindset, and skill level every minute of the day. If any of these factors are off, they take a break. It's vital for long-term success to develop a self-monitoring plan. Monitor your general mood and your specific emotions. When you aren't feeling up to par, stop trading.

Systematically monitoring your mood is essential. Some traders suggest rating one's mood before the markets open on a 1-10 point scale, ranging from out of sorts, pessimistic (1) to full of energy, optimistic (10). Unless they rate themselves at an 8 or above, they take the day off. They rest, relax, and reenergize before returning to the markets.

In addition to rating your general mood, it's also important to identify feelings of regret and revenge. When we've made a series of losing trades, we regret it. Regret is a powerful emotion; it's often more powerful than fear and greed. Traders have a strong need to avoid regret. Feeling regret forces us to admit that we were wrong. It makes us feel guilty. We entertain "if-only" scenarios: "If only I had done X or Y, I would not have lost." Regret makes us feel inadequate, and uncomfortable. The easiest way to avoid regret is to deny you've made a mistake, to believe that one can still make back what one has lost. The problem with avoiding regret is that you shift your attention away from the problem. You don't notice that something is wrong. You fail to see that a fundamental factor has changed, either you have changed psychologically or the market conditions have changed. In either case, it's better to stand aside than continue trading. Look for signs that you are avoiding regret. Focus on feelings of anger, frustration, or revenge. When you've made a series of losses that you view as unfair, you will feel angry; you'll want to take your revenge out on the markets. When you feel these emotions, it's probably a way of avoiding subsequent feelings of regret upon admitting a loss. It's vital for your survival to stop trading at that point. You've lost your objectivity and it's likely that you will trade impulsively because your full attention is not on your immediate experience. A related emotion is fear. When you are afraid of the consequences of losing money, you are also avoiding regret. It's better to stop trading, regain your composure, and start up again when you are refreshed, which may be the next day.

You should also take active steps to minimize feelings of regret. Neutralize these emotions by monitoring your self-talk. When one feels regret, he or she usually thinks, "I should have done X, and I'm an unworthy person for not doing X." The truth, however, is that the markets are unpredictable. You can't blame yourself for not anticipating every possible influence that may go against your trading strategy. And if you lost money because you didn't clearly specify a trading plan or stick with it, feeling regret isn't going to help you very much. It may be useful in this case to kick yourself a little, but it's much more useful to take a more positive outlook, and think, "Trading takes practice; the more I practice, the more I'll develop the discipline I need to be a profitable trader." By acknowledging that you've made a little mistake and reminding yourself that you will do everything possible to minimize its significance, you'll feel less regret. You can acknowledge your limitations more easily. But, whatever you do, don't dig the hole deeper. Face your limitations, regain your composure, and go back in when your mindset and market conditions are just right. You'll find that you will make more profits in the long run.

Top traders are brutally honest about their performance. There's a powerful tendency to assess our trading performance in a self-serving way. We want to feel good about ourselves, so we tend to convince ourselves that we're doing better than we actually are. But long-term success as a trader requires that you know exactly where you stand. There are countless examples of traders who ignore their limitations, feed their trading accounts annually, and never actually achieve profitability. It's a shame. If they would have just objectively looked at their performance, kept track of which strategies and methods were working, and which ones were not, and repeated the winning strategies, they could have achieved profitability. It may be difficult emotionally, but facing up to our limitations is the only way long-term profitability can be achieved.

Facing limitations is difficult, especially if one is a poor performer. Psychologist Dr. David Dunning argues that poor performers are "blissfully unaware of their incompetence." They overestimate their abilities. Their intuition tells them that their performance is superior, yet objective estimates show their actual performance is under par. For example, when people are asked to take a test measuring abilities, such as thinking logically, writing grammatically, and spotting funny jokes, they tend to overestimate their performance: they think they are performing well above average, yet their actual performance is in the bottom 25%. These biased estimates aren't restricted to taking tests. People in a variety of settings and skill areas overestimate their abilities. Debate teams in college tournaments wrongly think they are eloquent debaters. Hunters who are bad shots think they are expert marksmen. And medical residents think they know how to diagnose patients more accurately than they really can. Studies have even shown that when people are offered money to estimate their performance accurately, they still can't do it. This phenomenon has also been documented in the trading realm. Behavioral economist Dr. Terrance Odean, for example, has shown that online investors tend to trade beyond their skills. They don't have an accurate picture of what they can and cannot do, so they overtrade, and in the long run, they reduce their overall profitability. It's vital for long-term success to keep an accurate, objective log of your performance. Don't allow yourself to think you have more skills than you actually do. Top performers don't overestimate their performance abilities. They try to gauge their performance as accurately as possible, and tend to avoid worrying about whether they are "good performers" or not. They live in the moment, and just try to perform to the best of their ability, rather than try to convince themselves they are top performers. They see setbacks as just objective pieces of feedback, assess their implications, and take decisive action to improve matters. In the end, focusing on their immediate experience, rather than enhancing their view of themselves, helps them remain profitable.

So try to be as objective about your performance as possible. Keep in mind that your intuitive performance estimates may be extremely exaggerated. Try to ignore them. Create an objective log of your trading results, such as a trade diary. By keeping a trade diary, you will know exactly how well you are performing. And the more objective about your performance you can be, the more likely you'll take the steps you need to achieve profitability and maintain it.

The creative trader stays ahead of the crowd. Many traders are conformists. They look toward the masses for confirmation of their decisions. If the crowd is buying, they buy. If the crowd is selling, they sell. But winning traders are more flexible. They can do the opposite of the crowd when they need to. They listen to their intuition and allow their own perceptions to guide them. The ability to create and devise new trading strategies is a related talent that separates winning traders from everyone else who trades the markets. It's useful to understand the creative process, and learn how to raise your creative potential.

Why are some people more creative than others? There are many theories, but psychologist Carl Rogers proposed one of the most influential. Rogers pointed out that many people grow up in a climate where they feel threatened. They feel so psychologically unsafe that they are afraid to express their own ideas. Their parents were extremely controlling, and believed that unless their children lived up to their expectations, they did not deserve their full respect. There was an implicit message that "unless you do what I say, I won't fully love you." Creative people, in contrast, feel so safe and free that they have no difficulty exploring new ideas and beliefs. They seek out new experiences freely and live by their own internal standards. Research studies back up Carl Rogers' claims. For example, in a seminal study by Drs. Harrington, Block, and Block, children's social environments were studied in childhood, and creative potential was assessed when the children reached adolescence. Creative adolescents grew up with parents who respected their child's opinions and encouraged them to express these opinions. They let their children make decisions for themselves, and encouraged their children to be curious and to explore and challenge rules and conventional wisdom. Psychologists observed parents' actual child-rearing practices in laboratory tasks. Parents of creative children were encouraging and supportive. Less creative children had parents who didn't believe in letting their children explore their feelings and ideas. They didn't let their children question their decisions, and believed that "a child should be seen and not heard." Observers described these parents' child-rearing practices as over-controlling and as extremely critical.

These findings illustrate that our past childhood experiences may influence our ability to think creatively. People who had controlling and overly critical parents are afraid to express their own feelings and ideas as adults. They are afraid to think flexibly, look inward, and go their own way. If you grew up in such an environment, you may have trouble thinking creatively. Do you have trouble following your own hunches? Are you secretly afraid that you will be punished if you make a mistake? Do you feel you must receive confirmation from others before making important decisions? If you answered, "yes" to any of these questions, you may have grown up in a childhood environment that didn't foster creative thinking.

It's important to think about ways you may prevent yourself from thinking freely or openly. It's vital to acknowledge how past childhood experiences with parents and other significant adults may still influence your ability to think freely and flexibly. You may have been taught that you must seek approval from authority figures (although no such authorities exist when it comes to trading), and that you can't trust your own perceptions of how you see the world. You may also be afraid that you may "do something wrong" and receive harsh punishment. You may have developed such beliefs from the relationships you had with your parents as a child. As an adult, however, it's useful to remind yourself that your parents aren't next to you watching your every move. You can trust your own opinions. You can act independently and the only person's opinion that really matters is your own. You don't need to seek out the approval of others. Indeed, there is no one to seek approval from.

If you want to be an independent-minded, creative trader, it's essential that you identify beliefs and attitudes that hold you back. You may have learned to limit yourself because of childhood experiences. Identify the beliefs that prevent you from thinking creatively, and you'll find you can more easily think of new and profitable trading ideas. Once you release your creative potential, you will reach new heights as a profitable trader.

Winning traders are driven by a strong motivation to achieve. Trading coaches and seasoned traders have observed that the most profitable traders are those who decided early in life to chase success. They're the kind of people who persist until they reach an objective. They are not easily discouraged. They push themselves to the limits and build up their skills until they achieve high levels of mastery. And in the process, they develop rock-solid confidence. They do all of this as rapidly and as independently as possible. If your goal is to be a consistently profitable trader, it's in your best interest to approach it with zeal.

Psychologists have studied ambitious people for decades. They possess several common traits: They work tirelessly to achieve their goals. They are open to new experiences, and they are constantly thinking of innovative ways of reaching new heights. But perhaps the most interesting aspect of their personality is the way they go about achieving a goal. They are extremely organized and focused. When it comes to completing tasks, for example, they tend to pass quickly over easy tasks to complete more difficult ones. They set priorities and devote the bulk of their efforts to the tasks that really matter, while ignoring tasks that may have relatively little impact.

When it comes to feedback about their performance, they prefer feedback that is as specific and concrete. They would rather have honest, accurate feedback that addresses their shortcomings in scrupulous detail than sugarcoated fluff. They aren't afraid to face their shortcomings head on. They work independently. They are not concerned with the performance of others. Although they are extremely competitive, they don't compare themselves to other. The only reference point that matters is their own.

It's useful to use the ambitious trader as a model for success. Work tirelessly to achieve your goals. But be organized and spend your time wisely. For example, don't waste your time debilitating about which one of many equally profitable opportunities to take. Pick one and devote the rest of your time and energy to outlining a detailed trading plan. Map out strategies for entering, exiting, and controlling your risk. Once your plan is outlined, execute if effortlessly. Don't be afraid to face your limitations. Work around them, and approach them with a realistic sense of optimism: If you work hard enough and put your effort in the right places, you'll be a profitable trader. Through repeated practice, you'll eventually build the skills you need to master the markets.

Successful traders are disciplined. They are calm and rational. They don't let emotions like fear or greed unduly bias their decisions. They formulate well-defined trading plans and are able to follow them. They avoid the urge to act on impulse. Trading in a systematic, disciplined fashion is preferred, but as we all know, traders aren't always disciplined. A psychological study by researchers at SUNY, Albany (Muraven, Slessareva, & Shmueli, 2003) on the dynamics of self-control may provide insights into what it takes to maintain discipline and self-control.

It takes physical and psychological energy to maintain self-control. For example, research studies have shown that for many people, there are limits to how much self-control one can exert. When people are asked in the laboratory to complete a series of tasks in which self-control must be maintained, they eventually become fatigued and have difficulty maintaining self-control on subsequent tasks. This phenomenon is commonly observed in scalpers who go in and out of the market repeatedly. They report that making trade after trade produces fatigue to the point that it is difficult to continue trading. Self-control takes energy, and the more self-control you must exert, the more energy it takes to keep going. As with any strenuous activity, you eventually run out of energy, and it's hard to go on. Thus, the most obvious way to maintain self-control over the long run is to build up psychological energy. How can you save or build up psychological energy? Specifically, you can limit the number of trades you make per day or per week, and thus, limit the amount of energy you expend. You can also make sure you sleep soundly, exercise regularly, and eat nutritious meals. This will also ensure that your physical and psychological energy are at peak levels.

A psychological study by Muraven and colleagues offers an interesting twist to the dynamics of self-control that is especially pertinent to trading. Motivational incentives, such as the profits traders receive from winning trades, can exert a powerful influence on the ability to maintain self-control. When incentives are low, people are less likely to maintain self-control. For example, in laboratory studies if participants are given little incentive, and feel tired and worn-out after completing various tasks that require self-control, they eventually get so fatigued that they become undisciplined on subsequent tasks. Participants who perceive a greater reward for sustaining discipline, in contrast, can more easily maintain self-control. It's as if they are thinking, "I'm tired; I want to just take it easy and cut loose, but the incentives are high enough that I'm going to hold out a little longer." You might see how this finding has implications for trading. If a trader makes trade after trade, scrupulously following a detailed trading plan, but has not seen much profit, he or she will have trouble maintaining discipline on subsequent trades. The trader may think, "What's the point. I've been following my plan to no avail, and I might as well just trade more freely." When one is fatigued, trading plans are likely to be abandoned.

A second interesting finding concerns how fatigue influences the perception of rewards. When participants were fatigued as a result of completing a series of tasks requiring self-control, they had difficulty perceiving incentives accurately. They under-valued the rewards, and therefore, the incentives were less motivating.

These studies show how fatigue and motivational factors influence one's ability to maintain self-control. When traders are tired and worn out from making a series of trades, they will have difficulty maintaining self-control. In addition, the potential rewards that may be achieved by maintaining self-control will be minimized when one is fatigued. Thus, it's to your advantage to build up as much psychological energy as possible. If you have a great deal of energy, you will be able to be more in tune with the potential rewards you'll receive by maintaining discipline. And if the potential rewards are in the forefront, they can act as powerful motivators. You'll continue to maintain discipline even if you start to become a little fatigued. Don't underestimate the impact of the psychological processes that can help you maintain discipline. Make sure that you are rested, relaxed, and full of energy before you start the trading day. The more energy you have available, the more easily you can maintain the self-control you need to stick with your trading plan and to achieve consistent profitability.

When you have put on a trade, it's essential to stay focused on monitoring it. You must be able to accurately perceive the signals that indicate the market is going against you, and you must act expediently to protect yourself. Psychological issues, such as self-doubt, wavering confidence, or a lack of commitment, can distract you, however. They may impact your ability to effortlessly execute your trading plan and manage a trade. Although it's essentially impossible to drive out all psychological conflicts from your psyche, it's useful to try to resolve as many psychological conflicts as possible, so that they don't intrude into your consciousness, and interfere with your ability to focus on the trade.

When you have a psychological conflict, it's in your best interest to resolve it as soon as possible; otherwise it just lies there in the back of your mind, taking up precious, limited psychological energy. By identifying psychological issues before the trading day, you can decrease the possibility of these issues entering your consciousness when you least expect them to surface. Do you have unresolved conflicts that lie in the back of your mind? It's hard to just push these conflicts completely out of your consciousness and pretend they don't exist. Ironically, the more you try to deny the existence of these conflicts, the more psychological energy you will waste. Rather than trying to ignore conflicts, it's better to acknowledge and face them head on. Most of the time, the mere acknowledgement of your conflicts will produce a quick resolution. (As Dr. Ari Kiev suggests, if you acknowledge the issue, you can easily let it go.)

Even if you are not the kind of person who has a lot of past conflicts to resolve, there are some conflicts that all traders must face at one time or another. There are many beliefs about trading that hold some validity but are hard to accept. For example, novice traders must acknowledge and address the possibility that a series of winning trades may have been the result of a run of good luck, rather than trading skill. Although it's satisfies our ego to think we are brilliant traders, it's better to acknowledge the possibility that we may not be as talented as we want to be, than pretend we are something that we are not. Since it takes more psychological energy to pretend that you have trading skills that you don't actually have, it's better to just admit it and take action to remedy the situation. For example, one can get additional instruction and trading experience, refine his or her skills, and become a top-notch trader.

There are similar beliefs that some traders may be afraid to acknowledge but should. For example, a trader may think, "Perhaps I was a good trader at one time, but the market conditions have changed and I may not be able to live up to my expectations of trading profitably." All traders face this possibility at one time or another. It may be true or it may be false, but regardless of the validity, allowing such a belief to remain in the back of one's mind takes up psychological energy. It's better to acknowledge the possibility, and if it is false, remind yourself that it is absurd, or if it is true, take the necessary steps (such as learning new trading strategies) to prove it wrong.

Many psychological conflicts remain in the back of your mind. They are there lurking below your awareness, and when you are in a vulnerable mood, such as when you are fearful or disappointed, these beliefs can move from the back of your mind to the forefront. It's not useful to ignore these potentially distracting psychological issues. It's better to acknowledge them up front. Once you do, you are more likely to be able to say to yourself, "that may be true, but it is of no consequence right now." Then, you better spend some time during your "off hours" dealing with it. Conflicts in the back of your mind can have a powerful impact on your ability to focus on your trading. Make sure that you face your conflicts, spend time examining them, and try to resolve them. If you can do so effectively, you'll be able to achieve the mindset of a winning trader.

There just isn't enough time in a day to get everything done. This is especially true when it comes to trading. There are numerous trading strategies, and you can easily run out of time if you try to learn them all. There are endless possible trading opportunities to look for, and when it comes to trying to look at all the available information about the market, it can be overwhelming. It's vital to set priorities, make hard decisions about what you want to do, and focus your energy on achieving those specific objectives.

In many occupations, the more work you put in, the more payoffs you'll realize. If you are in sales, the more cold calls you make, the higher your potential sales. If you are a construction worker, the more hours you put in on the job, the more money you take home each week. In many ways, trading is quite different. There isn't a one-to-one correspondence between the amount of work you put in and the profits you'll pile on. You must prioritize. For example, you don't need to spend several hours monitoring media coverage of the market if it doesn't directly lead to a profit. Most of it is for entertainment value only, so spending hours reading or viewing the latest media hype is a waste of valuable time. You need to work efficiently and make sure that the time you spend learning about trading and the market does indeed pay off.

Trading isn't a 40-hour a week job. It's not a matter of putting in 40 hours a week and getting a steady paycheck. It's about reaching a specific objective, no matter how much time it takes. For instance, if it takes only 15 minutes for a skilled trader to make enough profit to have a year's worth of living expenses, so be it. Seasoned traders don't have to spend 40 hours a week to make a living, if they have the requisite skills (and novice traders may need to put in more time building up these requisite skills). The point is that if you're a novice trader, you can't work under the assumption that everything you do will have a direct payoff. There are only so many hours in the day, so you must spend your time efficiently. Don't waste your limited time in activities that won't have a direct payoff. For example, if you're an intra-day or swing trader, it doesn't make sense to read about the markets and world events that have no direct bearing on the intra-day or intra-week prices of the stocks you want to trade. Similarly, sifting through stock charts that have no bearing on the stocks one trades is also time misspent. Avoid information overload. You need to maintain focus and efficiency. Trade a few key stocks, and know everything you can know about those key stocks. Become an amateur specialist. Memorize the chart patterns, how the prices fluctuate during the day, and the factors that coincide with the price changes. Knowing about stocks you don't plan to trade or about broader economic events that don't influence your key stocks will take time that, realistically, you just don't have.

Trading is a challenge that requires hard work and persistence. It is essential to manage your time and energy wisely. Focus on what matters most. Don't be distracted by learning additional trading strategies that you will never use, or new indicators that are redundant with basic indicators of trend. And don't believe you must keep up with all the media hype. Working efficiently will ensure that you will build the skills you need to become a consistently profitable trader.

There are numerous examples of people who quit high-paying jobs to follow their passions. A lawyer may open a cafe to fulfill a dream. A CEO of a corporation may retire early to pursue a new career as a jazz musician. What many of these people know is that money is a poor motivator in the end. It's much more satisfying to pursue objectives for the pure joy of pursuing them, regardless of how much money you can make. Many winning traders are more motivated by the process of trading than by the profits they are making. It's common to hear traders say, "I love trading so much that I would do it for free if I had to." Indeed, when one looks into the backgrounds of top traders, the story seems to be the same: They all tried to get a job in the trading industry as soon as possible, any job as long as it involved trading in some way. The markets fascinated them. The money was either secondary or not an issue at all.

Successful traders love the challenges the market offers and view their work as meaningful. But many novice traders look at trading from a conventional view of success. They focus on competing with others, beating them out of profits, and winning bragging rights. Such an approach may satisfy a trader initially, but over time, it's unlikely to be sufficient. Pursuing trading as a passion is a healthier, more satisfying way to approach trading. It's more useful to focus on pursuing goals that are intrinsically interesting and personally meaningful. One should pursue trading because he or she enjoys the intellectual challenge. Market action is intrinsically interesting. It is a rewarding intellectual challenge to devise innovative new trading strategies, and seeing how well your ideas pan out, just for the fun of it, is exciting and enjoyable, regardless of whether you win or lose. Viewing trading from this perspective can act as powerful motivators. Individuals who pursue trading in this way are more likely to feel satisfied and can more easily manage the extreme stress the market is infamous for producing. When you aren't focused on the profits, it's easier to stay calm and focused. You will be better able to accept your limitations. And in the end, you'll find your performance is heightened as a result of taking a more passionate approach to trading.

The way you approach trading dictates how you feel about it, and how well you will do overall. Those who find trading intrinsically satisfying, enjoyable, and meaningful will put in the necessary hard work and achieve high performance levels. So cultivate a healthy approach to success. Don't focus on the money and status that successful trading may bring. Enjoy the process of trading. Seek out challenges and the satisfaction of meeting them. You'll end up more profitable by doing so.

Many novice traders have difficulty facing a cold, hard fact about trading: You can't get rich overnight. You've got to just take it one day at a time, and make a relatively small amount of profit across a series of trades. Experienced traders know this fact. They may hope to make big profits in the long run, but on any given day, they just focus on making as many reasonable profits as possible, not on a single, life-changing trade. Many traders may know this fact, but it is hard to accept. Many are initially drawn to trading with the hopes of making big profits, money that can be used to finance a luxurious, exciting lifestyle. Or money that can be used to show family and friends that one is deserving of envy or respect. It's dangerous to approach trading from this perspective, however. It directly contradicts the fact that it's going to take some time before one makes enough money to support a new lifestyle or to impress others.

What's the harm in dreaming of making big riches? Nothing, if you realize it is just a fantasy. If you don't, you may want to act on it. If you dream about how big wins can change your life, you'll start to want to make extremely huge profits, and then, it's likely that you'll start taking measures to make these big wins, even when low risk opportunities are not available. You may take bigger, riskier trades with the hope of being lucky enough to triple your capital. Or you may be tempted to stray from your trading plan because you see the potential to make a big win. You may even abandon all risk controls because you may start to think, "Unless I can make some big money fast, trading isn't worth it anyway."

It's important to stay modest. It is unlikely that you will be lucky enough to be set for life after only a few big trades. You will have to put in a long, hard effort just as all seasoned, successful traders have done. It's vital for survival that you take the proper perspective. Someday you may be wealthy and have an exciting lifestyle, but it isn't going to happen tomorrow, or probably in the next year. For now, just take it one day at a time. Focus on the process of learning how to trade. Trading is fun and you should enjoy yourself. When you take this perspective, you'll be satisfied with your trading outcomes no matter how well you are doing. And when you trade a detailed trading plan, use proper risk control, and just aim for a reasonable, realistic profit, you will trade more calmly and objectively. You'll start piling on profits, and maybe over time, you'll make the kind of money that can fulfill your grandest dreams. But for now, hard work, realistic goals, and persistence are the only things that will help you become a consistently profitable trader.

One of the biggest mistakes amateur traders frequently make is letting their emotions influence their trading decisions. For example, the typical novice puts on a trade that is too large, and may not delineate or follow an adequately detailed trading plan. The consequence of this trading approach is that one is overly emotional. Decisions may be impulsive and based on fear, rather than on a cold, objective analysis of available information.

Emotions often bias the perception of market action and often lead to major trading mistakes. Although many traders intellectually know they must maintain objectivity, this can be hard to do in reality. Prices are in constant flux, and taking advantage of this volatility is the way traders make profits. The greatest profits are made when the masses react emotionally, such as when markets reverse, trends change and the about-face in supply and demand imbalance provides price momentum and velocity. It's understandable that as prices change rapidly, one's emotions jump up and down. Most people find this rollercoaster ride uncomfortable. A more optimal emotional state is one where a trader is focused on the process of trading. One is calm, relaxed, and able to analyze the flow of incoming information with ease.

How can you maintain an optimal level of emotional experience? It takes practice and experience with the markets. But there are a few precautions you can take. First, try to limit your risk. Trade small positions if you have to. A useful adage to follow is, "Trade money you can afford to lose." If you are taking risks with money you can't afford to lose, you'll naturally feel a sense of insecurity and urgency. The best way to control this well-founded fear is to trade smaller positions. It's also essential to use a protective stop. Although it takes some skill to place a stop in a way that you can account for volatility, a protective stop gives you an added level of security that is bound to help ease the fear and anxiety you experience as you monitor your trade. Finally, always outline a very detailed trading plan. Don't leave any element unspecified. Fear and anxiety are most elevated under conditions of uncertainty. When you leave an element of your trading plan unclear, you'll not be sure of what to do under all possible conditions. By defining each element of a trading plan, in contrast, you'll know exactly what you are trying to accomplish and you'll know in your gut that you can tackle any event that should arise as you monitor your trade. So get off the rollercoaster. Don't let your emotions get the better of you. Take precautions to control risk and trade a detailed plan with specific entrance and exit strategies. You'll achieve consistent profitability in the end.

Have you ever been at a party and felt a need to impress others. Many see trading as an exciting profession. It's a glamorous job. Traders are seen as rich and powerful. People like to hear about how traders make huge profits, and they secretly hope that you can tell them how to make some easy money. It's often tempting to want to bask in the glory of success, to be the center of attention, or the object of envy. But winning traders know how to stay humble. They don't seek out glory because they know that the profits they realize today can quickly evaporate tomorrow. Bragging about their success and then feeling the need to keep up appearances as a skilled, wealthy, and profitable trader has doomed many traders. Don't let your psychological needs for glory and recognition hamper your trading performance.

In the end, the profitable trader tries to conceal his or her trading success when talking to people who aren't in the business. Why? The more you present yourself socially as a "successful trader," the more psychological effort you will spend defending this reputation. Several research studies have documented that one of the biggest obstacles to sound decision-making is the need to save face in social situations. When people make a mistake, they tend to dread admitting the mistake to others. They are so reluctant to face the adverse social consequences of having made a poor decision that they stay on a losing course of action, rather than admit they were wrong. For example, a trader may be reluctant to sell off losing positions in order to avoid the possible social criticism that acknowledging a failure may bring. This phenomenon isn't restricted to trading. It happens in large corporations as well. When a large sum of money is dumped into a failing project, corporations don't cut off resources; they tend to increase funding because they just don't want to admit they have made a mistake. Remaining on a losing course of action, however, can spell disaster. Doing whatever you can do to minimize these psychological processes will enhance your trading performance. And in this case, that means keeping your trading performance to yourself.

Consider what may happen if you bragged to your friends about how you've been holding a potentially profitable position, and plan on making a big killing in the next week. What would you do if the price fell hard? What would you do the next time you saw your friends? Tell them about how you failed after bragging about how much money you planned to make? Not only would you dread telling them about how much you had lost, you may unconsciously avoid admitting to yourself that you made a big mistake. Secretly you may hope that the trade will turn around so that you can save face with your friends. In the back of your mind, the powerful need to save face and protect your reputation can influence your trading decisions. Trading is hard enough. Why introduce additional social and psychological pressures that will adversely influence your trading results? Keep the specifics of your trading career to yourself. There is no sound reason to discuss the specifics of your trading career at social gatherings. It's often done just to build up your ego, and enjoy the attention of others. You'll pay a price for this short-term gratification in the long run, however. So follow the advice of seasoned traders: Be quiet and stay profitable.

Pride has been the downfall of many traders. Pride is a powerful emotion. We feel pride after making a significant achievement, and we are especially proud when the achievement has increased our social status. Trading is difficult. Few people master it, so when one is doing well, it's natural to feel a sense of accomplishment and pride. But there's a point where pride can be overpowering. When people are so proud that they are full of themselves, and feel invincible, they may not think clearly. They may have too much psychological investment in feeling superior, and when this happens, their vision is blurred.

Pride is most evident during competition. Some people have an "I'll show them attitude." They secretly feel inferior and they are out to prove their worth to others. When these people make a significant accomplishment, they have a burning desire to brag about their achievements so as to feel superior to others. Gaining a sense of superiority is what motivates them, and the brass ring is the right to brag about one's prized accomplishment and to put down others. It's adaptive to be a little proud occasionally, but at an extreme, too much pride can lead to inflexibility. When one is too proud, there's a strong need to maintain one's pride. When one tries to maintain pride, anything that contradicts one's feeling of omnipotence is threatening. A person may be afraid to look at his or her shortcomings objectively. Indeed, a person who is too proud may not be able to admit that he or she has any faults.

There are often social consequences for being too proud. Many people dislike those who are too proud. They watch and wait in anticipation for the person to fail. These psychological processes play a significant role in creating stress and indecision. The overly proud trader is likely to feel strong social pressure to continue making large financial gains to save face. The added pressure is likely to sap up precious psychological resources, and produce unpleasant emotions that are bound to interfere with rational decision-making.

The winning trader is not overly proud. He or she is humble and doesn't try to compete with others. The winning trader develops internal standards of self-worth and evaluates performance by looking inward. Winning traders compete with themselves. They look at their past performance and try to do better. They don't compare themselves to others. They don't feel pride or shame based on how well they are doing compared to other traders. They focus only on how well they think they are doing. The only opinion that matters is their own. It may mean they don't have any bragging rights, but they know it's more important to stay focused on the trade, their immediate experience. Focusing on others takes them out of the zone, and when a trader is distracted, he or she will make mistakes that will have severe financial consequences. By remaining humble, the winning trader stays clear, focused, and objective. It's the mindset of success.

Every time you make a trade, you put money on the line. To the seasoned trader, money is just abstract "capital." It loses some of its significance. But to a novice trader, money represents house payments, school tuition, and food on the table. When you think of your stake as actual money, there's a strong need to want to trade it perfectly. You don't want to make a mistake and lose your valuable assets. However, a cold, hard fact of trading is that you'll see more losses than wins, especially when you are first starting out. It's a game where losses are the rule rather than the exception. Feeling that you need to be perfect, and make a profit on almost every single trade is not only unrealistic, but it can create so much psychological stress that you'll have difficultly focusing on the trades that actually will produce a big profit. It's wise to take a more adaptive approach to trading, and acknowledge that many times things are not going to go your way.

There's a strong human need to want complete control over our destiny. We want to believe that if we analyze the markets long enough, we'll have perfect knowledge and we can trade to perfection. But these assumptions do us more harm than good. Many times core assumptions, such as these, are "maladaptive" in that they restrict our actions, and often cause unwanted stress. And when we are overly stressed, we have a strong desire to avoid dealing with problems, rather than facing them head on. It is much more useful, though, to examine core assumptions, realize they may be faulty, and change them. For example, many people work under the assumption that they must be thoroughly competent, adequate, and achieving in everything that they do. Dr. Albert Ellis claims that holding such a belief produces fear and anxiety, which for traders often produces hesitation and self-doubt. The development of this belief is understandable. As we grow up, whether it is at home, school or work, we often face adverse consequences for not being scrupulously proficient, and we begin to believe that we must be thoroughly competent, adequate, and achieving in everything that we do. We pay a price for this belief, however. If we believe that we must always be competent, we will expend all our precious psychological energy mulling over the negative consequences of failing, rather than focusing on what we are doing in the here-and-now to implement our current trading plan. Traders who believe they must be thoroughly competent spend all their time worrying about what they did wrong, what may go wrong, and how they will recover should they fail. These thoughts are distracting and obscure the flow of immediate experience, and the ability to read current market activity with unfailing accuracy.

A more adaptive approach is to realize that it's impossible as a trader to be thoroughly competent, adequate, and achieving all the time. Certainly, you should develop an extremely detailed trading plan and try to account for all adverse events that may go against your plan, but there are limits to what you can do. Your trading idea may just not pan out, and there's little you can do about it besides taking proactive steps, such as managing risk and having clearly defined exit strategies to protect your long term financial interests. Holding yourself up to unrealistic standards is just going to make you feel frustrated, fearful, and unnecessarily uptight. By accepting your limitations, and trying to work around them, you'll feel more at ease, and ready to capitalize on a high probability setup when you come across it. So don't be such a perfectionist. Be realist in your goals and expectations, and you'll realize the profits you've been seeking.

Many seasoned traders say that cultivating a peak performance mindset is the key to trading profitably. For example, there are moments when everything just seems to click. A trader is in tune with the ebb and flow the markets. He or she senses what will happen next, and with absolutely no self-doubt or hesitation, he or she can freely and effortlessly execute trade after trade. At that point, the trader moves into a higher level of psychological existence, losing his or her sense of self in the process of trading. All attention is focused on the trade. It's a pleasurable, rewarding mental state. It isn't the case that traders experience the peak performance mental state all the time, and maybe it isn't necessary. But it's a good ideal to strive for. Whenever you can cultivate a peak performance mindset, you'll be trading at your best.

What is a peak performance mindset? There are many different names for it: "the zone" or "flow." Peak performance states were originally studied by psychologist Abraham Maslow who studied self-actualized people who often reported peak experiences where they experienced a higher level of existence. Recently, psychologist Mihalyi Csikszentmihalyi has studied people who experience "flow." Flow is an optimal mental state. It's the pure joy a person experiences when he or she engages in a challenging activity for its own right. All attention is focused on the task at hand. It's so engaging that one's sense of self is lost in the task. One of the best examples of flow is mountain climbing. It requires focused attention and it's extremely challenging.

Research studies have shown that flow experiences tend to occur when eight conditions are met. The more you can meet each of these eight conditions while trading, the more trading will be an enjoyable flow experience for you. Let's consider the eight conditions and how they might be met. First, the task or goal must be possible to complete. In other words, immediate goals can't be too abstract or too high. When it comes to trading, for example, it is best to just execute a trade rather than being overly concerned with profits or achieving unrealistic performance standards. Second, a person must be able to intensely concentrate on what he or she is doing. While trading, it's vital that you have a detailed trading plan and control risk so that you can focus on monitoring the trade. It's also essential that you maintain control over your psychological conflicts and life stressors so that they don't interfere with your concentration. Third and fourth, the task must have clear goals and immediate feedback. Perhaps trading tends to be a flow experience because the goals are often clear and the feedback immediate. Again, a detailed trading plan helps you keep the goals clear. Similarly, the proper signals specified beforehand allows for immediate feedback. Fifth, a flow experience involves deep and effortless involvement. People are so involved that the everyday worries of life tend to be cast aside. Sixth, while in a flow experience, people have a decisive sense of control over all their actions. Seventh, one loses one's sense of self while in a flow experience. Some traders report that when they are engaged in trading, they are so focused on their experience that they are no longer self-conscious; there is no self-doubt or self-reproach. They just focus on trading. Finally, time seems to just slip away while in a flow experience. Hours can go by like minutes, for example.

Under the right conditions, trading can be a flow experience. In the end, you have the choice as to how you approach trading. Do you approach it as a flow, or peak performance, experience? Or are you approaching trading as a chore, a means to an end? If you approach trading for its own sake, as an intrinsically rewarding, enjoyable experience, you will trade more profitably in the long run. And more importantly, you'll enjoy the journey along the way.